I am the editor of Forbes Magazine, and believe strongly that entrepreneurial capitalism and market-based thinking can solve the world's problems. This is my second stint at Forbes -- between 1991 and 1997, I was a reporter, a staff writer (five cover stories), associate editor and Washington bureau chief. In between, I caught the start-up bug: I co-founded P.O.V. Magazine (Adweek's Startup of the Year), and then launched Doubledown Media (Trader Monthly, Dealmaker, Private Air, etc.). As a fattening hobby, I have reviewed restaurants for various magazines since college (and was a National Magazine Award finalist for my wine writing). I used to think chronicling the world's greatest business minds made me a great entrepreneur, but I now realize my time as an entrepreneur made me an acute business journalist. For the full story, check out my book, just out in paperback, The Zeroes: My Misadventures In the Decade Wall Street Went Insane.

Warren Buffett's $50 Billion Decision

This article, by Warren Buffett, as told to Randall Lane, appears in the upcoming April issue of ForbesLife magazine, as part of its “When I Was 25″ series.

By Warren Buffett

Benjamin Graham had been my idol ever since I read his book The Intelligent Investor. I had wanted to go to Columbia Business School because he was a professor there, and after I got out of Columbia, returned to Omaha, and started selling securities, I didn’t forget about him. Between 1951 and 1954, I made a pest of myself, sending him frequent securities ideas. Then I got a letter back: “Next time you’re in New York, come and see me.” So there I went, and he offered me a job at Graham-Newman Corp., which he ran with Jerry Newman. Everyone says that A.W. Jones started the hedge fund industry, but Graham-Newman’s sister partnership, Newman and Graham, was actually an earlier fund. I moved to White Plains, New York, with my wife, Susie, who was four months pregnant, and my daughter. Every morning, I got on a train to Grand Central and went to work.

It was a short-lived position: The next year, when I was 25, Mr. Graham—that’s what I called him then—gave me a heads-up that he was going to retire. Actually, he did more than that: He offered me the chance to replace him, with Jerry’s son Mickey as the new senior partner and me as the new junior partner. It was a very tiny fund—$6 million or $7 million—but it was a famous fund.

This was a traumatic decision. Here was my chance to step into the shoes of my hero—I even named my first son Howard Graham Buffett. (Howard was for my father.) But I also wanted to come back to Omaha. I probably went to work for a month thinking every morning that I would tell Mr. Graham I was going to leave. But it was hard to do.

The thing is, when I got out of college, I had $9,800, but by the end of 1955, I was up to $127,000. I thought, I’ll go back to Omaha, take some college classes, and read a lot—I was going to retire! I figured we could live on $12,000 a year, and off my $127,000 asset base, I could easily make that. I told my wife, “Compound interest guarantees I’m going to get rich.”

My wife and kids went back to Omaha just ahead of me. I got in the car, and on my way west checked out companies I was interested in investing in. It was due diligence. I stopped in Hazleton, Pennsylvania, to visit the Jeddo-Highland Coal Company. I visited the Kalamazoo Stove & Furnace Company in Michigan, which was being liquidated. I went to see what the building looked like, what they had for sale. I went to Delaware, Ohio, to check out Greif Bros. Cooperage. (Who knows anything about cooperage anymore?) Its chairman met with me. I didn’t have appointments; I would just drop in. I found that people always talked to me. All these people helped me.

In Omaha, I rented a house at 5202 Underwood for $175 a month. I told my wife, “I’d be glad to buy a house, but that’s like a carpenter selling his toolkit.” I didn’t want to use up my capital.

I had no plans to start a partnership, or even have a job. I had no worries as long as I could operate on my own. I certainly did not want to sell securities to other people again. But by pure accident, seven people, including a few of my relatives, said to me, “You used to sell stocks, and we want you to tell us what to do with our money.” I replied, “I’m not going to do that again, but I’ll form a partnership like Ben and Jerry had, and if you want to join me, you can.” My father-in-law, my college roommate, his mother, my aunt Alice, my sister, my brother-in-law, and my lawyer all signed on. I also had my hundred dollars. That was the beginning—totally accidental.

When I formed that partnership, we had dinner, the seven of them plus me—I’m 99 percent sure it was at the Omaha Club. I bought a ledger for 49 cents, and they brought their checks. Before I took their money, I gave them a half sheet of paper that I had made carbons of—something I called the ground rules. I said, “There are two or four pages of partnership legal documents. Don’t worry about that. I’ll tell you what’s in it, and you won’t get any surprises.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

We are limited by the beliefs we set in our mind, history shows that successful people are able to break these shackles and unleash their potential. The difference is the “ T ” between Can Do and Can’t Do. The “ T ” is your Thought. Read More

Berkshire Hathaway was started nearly accidentally! Look where he is now! He also talks about something I have been thinking about: buying a house can be = a carpenter selling his tools. I’m looking forward to reading more of the “25″ series.

What an inspiration. I read a case study on Berkshire Hathaway which inspired me, it was related to the CPA profession and confidentiality. Although, I leaned toward full disclosure I will never forget it. I had no idea how much of your career was timing. Amazing, keep the articles coming!!!

That Photo of Mr. Buffett with His Family Is The Most Priceless Asset I’ve Ever Seen of His…Why Isn’t He Investing In Pro Life For All Families?…3 Billion Babies, Approximately 6 Billion Parents w/o Them World Wide.

Feast of Great Mercy Sunday in less than 2 Weeks For Those Baptized into Christ’s Roman Catholic Family. With Jesus Crucified, Mary